“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Skyworks Solutions Inc (NASD: SWKS)? Today, we examine the outcome of a five year investment into the stock back in 2015.
| Start date: | 11/16/2015 |
|
|||
| End date: | 11/13/2020 | ||||
| Start price/share: | $75.28 | ||||
| End price/share: | $141.50 | ||||
| Starting shares: | 132.84 | ||||
| Ending shares: | 143.73 | ||||
| Dividends reinvested/share: | $6.96 | ||||
| Total return: | 103.37% | ||||
| Average annual return: | 15.26% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $20,334.06 | ||||
The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 15.26%. This would have turned a $10K investment made 5 years ago into $20,334.06 today (as of 11/13/2020). On a total return basis, that’s a result of 103.37% (something to think about: how might SWKS shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Skyworks Solutions Inc paid investors a total of $6.96/share in dividends over the 5 holding period, marking a second component of the total return beyond share price change alone. Much like watering a tree, reinvesting dividends can help an investment to grow over time — for the above calculations we assume dividend reinvestment (and for this exercise the closing price on ex-date is used for the reinvestment of a given dividend).
Based upon the most recent annualized dividend rate of 2/share, we calculate that SWKS has a current yield of approximately 1.41%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2 against the original $75.28/share purchase price. This works out to a yield on cost of 1.87%.
More investment wisdom to ponder:
“The whole secret to winning big in the stock market is not to be right all the time, but to lose the least amount possible when you’re wrong.” — William O’Neil
